What is perfect competition in economics with examples?
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Perfect competition is a market structure where many firms offer a homogeneous product. Because there is freedom of entry and exit and perfect information, firms will make normal profits and prices will be kept low by competitive pressures.
Features of perfect competition
Many firms.
Freedom of entry and exit; this will require low sunk costs.
All firms produce an identical or homogeneous product.
All firms are price takers, therefore the firm’s demand curve is perfectly elastic.
There is perfect information and knowledge.
Features of perfect competition
Many firms.
Freedom of entry and exit; this will require low sunk costs.
All firms produce an identical or homogeneous product.
All firms are price takers, therefore the firm’s demand curve is perfectly elastic.
There is perfect information and knowledge.
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